focus reports: amended part ii tuesday, july 13 2:30 p.m
TRANSCRIPT
© 2021 Financial Industry Regulatory Authority, Inc. All rights reserved. 1
FOCUS Reports: Amended Part II Tuesday, July 13
2:30 p.m. – 3:00 p.m. This session provides an overview of the Amended Part II Financial and Operational Combined Uniform Single (FOCUS) reports. Join panelists as they discuss the new FOCUS Report that will replace the FOCUS Part II for the October 31, 2021 filing period. Moderator: Ann Duguid Senior Director FINRA Office of Financial and Operational Risk Policy Panelist: Ronald Chan Director, Risk Monitoring – Brookfield Office FINRA Member Supervision
© 2021 Financial Industry Regulatory Authority, Inc. All rights reserved. 2
FOCUS Reports: Amended Part II Panelist Bios: Moderator:
Ann Duguid is Senior Director in the Office of Financial and Operational Risk Policy. In this role, she works closely with FINRA’s Member Supervision team providing both accounting policy and financial and operational interpretive guidance related to both introducing and clearing broker dealers. Prior to joining FINRA, Mrs. Duguid worked at J.P. Morgan & Co., where she held various positions, including legal entity controller of J.P. Morgan Securities LLC., regulatory reporting manager (SEA 15c3-1, 15c3-3 and CFTC regulatory reporting), line of business controller for U.S. futures and options clearing and global OTC derivatives brokerage businesses. A Certified Public Accountant with more than 25 years of experience, Ms. Duguid began her career as an auditor at
Arthur Andersen & Co. She holds a BBA in Accounting and Management Information Systems from Loyola College in Baltimore, MD. Panelists:
Ron Chan serves as Risk Monitoring Director for Member Supervision. In this capacity, Mr. Chan has responsibility for the on-going surveillance and risk assessment of firms assigned to the Medium Diversified sub-group across financial, operational, trading, and business conduct risks. Before joining FINRA in 2013, Mr. Chan held various roles in regulatory operations at Fidelity Investments, and in broker-dealer regulatory reporting for Citi where he maintained a Series 27 license. He received Bachelor of Arts degrees in Economics and Sociology from Stony Brook University and holds the Certified Regulatory Compliance Professional (CRCP)® designation from the FINRA Institute at Wharton.
FOCUS Reports: Amended Part II
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Panelists
o Moderator• Ann Duguid, Senior Director, FINRA Office of Financial and
Operational Risk Policy
o Panelist• Ronald Chan, Director, Risk Monitoring – Brookfield Office,
FINRA Member Supervision
Copyright 2021 FINRA | FINRA Firm Grouping Member Forum
AGENDA
Recordkeeping and Reporting Requirements
Logistics
New Upload Templates & eFOCUS Testing
Questions
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To Access Polling
o Please get your devices out: • Type the polling address, https://finra.cnf.io/sessions/b1m3 into
the browser or scan the QR code with your camera.
• Select your polling answers.
Polling Question 1
1. How prepared is your firm for the changes to FOCUS Part II?a. My firm files a FOCUS Part IIA, so I am not worried
about the changes.
b. My firm files a Part II or Part II CSE, and my firm is actively preparing for the changes.
c. My firm files a Part II or Part II CSE, and my firm did not think the changes would impact our firm.
d. My firm files a Part II or Part II CSE, and I am aware of the changes but have not yet begun my analysis.
e. I am not involved in the FOCUS preparation for my firm.
Recordkeeping and Reporting Requirements for SBSDs, MSBSPs, and Broker-Dealers
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Logistics2
Overview of Changes
Statement of Financial Condition – AssetsPage 356 – Page 357 of Release
New Line Items
o I12014Non-allowable cash
o I12015, I12016, I12017Excess cash collateral pledged on derivative transactions
o I12019, I12022, I12024Total net securities, commodities, and swaps positions
From Part IICSE
o I0292, I0802Trade date receivable
Line Item Descriptions
o I0536Collateral accepted under ASC 860
Statement of Financial Condition – Liabilities & O/E Page 358 – Page 359 of Release
New Line Items
o I12025, I12026, I12027Excess cash collateral received on derivative transactions
o I12031, I12037Trade date payable (A.I. and Non-A.I.)
o I12032, I12038, I12044Total net securities, commodities, and swap positions
o I12033Obligation to return securities (A.I.)
o I12045SPE Liabilities (A.I.)
From Part IICSE
o I1562Trade date payable (Total)
Statement of Income (Loss) or Statement of Comprehensive Income
Page 366 – Page 367 of Release
Part IICSE
o I3926Gains or losses from derivatives trading
Not on Part IICSE
o I3990Gains or losses on commodities
Technical Corrections
o I3931Number of months included in this statement
o I3932, I3933For the period (MMDDYY) ___________ to ___________
Schedule 1 – Aggregate Securities, Commodities, and Swaps Positions
Page 386 of Release
Schedule 1 incorporates many line items (but not all) from the SIS (and Part II CSE)
New line items added for aggregate long/bought and short/sold positions for cleared and non-cleared:
• security-based swaps
• mixed swaps
• various other categories of swaps
SCH 2 – Credit Concentration Report for 15 Largest Derivative Exposures
Page 387 of Release
Contains two tables modeled from Schedule III in FOCUS Part II CSE
o Top 15 counterparties by current net exposures
o Top 15 counterparties by total exposure
SCH 3 –Summary of Derivatives Exposures by Internal Credit Rating
Page 388 of Release
Contains table modeled from Schedule IV in FOCUS Part II CSE
o Elicits detail on internal rating scales
o For each notch in rating scale, requires details on aggregate exposures and collateral collected from counterparties
SCH 4 –Geographic Distribution of Derivative Exposures
Page 389 of Release
Contains two tables modeled from Schedule II in FOCUS Part II CSE
o Detail on 10 largest countries aggregated in terms of counterparties located in the country, by current net exposure
o Detail on 10 largest countries aggregated in terms of counterparties located in the country, by total exposure
Computation of Net Capital (Filers Authorized to Use Internal Models)
Page 360 – Page 361 of Release
Largely modeled on capital pages from FOCUS Part II CSE
o Added section on Line 10 eliciting detail about market risk deductions computed under the Basel 2.5 framework
Computation of Net Capital (Not Authorized to Use Internal Models)
Page 362
o New line item added under 9.C.8. for risk-based haircuts computed under 15c3-1a or 18a-1a
o New line items added to clarify additional charges and haircuts specific to swaps
Computation of Minimum Regulatory Capital Requirements
Page 363
Page outlining calculation of minimum net capital requirements. Amended page includes two such sections for:
o Stand-alone SBSDs and OTCDD/SBSDs
o Stand-alone broker-dealers, broker dealer SBSDs, and broker-dealer MSBSPs
New Templates & Testing3
Form Import Templates
Different templates will be made available based on registration and model approval status
Various form import templates will be made available on a new landing page
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